Physicians sue over California law on out-of-network billing

FILE - In this May 18, 2016, file photo, California Gov. Jerry Brown gestures during a community event in Sacramento, Calif. Brown dramatically altered California�s criminal sentencing system when he was first governor a generation ago. Now, with Proposition 57, he is asking voters to change it back, to give corrections and parole officials more say in when criminals are released, and strip prosecutors of the power to decide when juveniles should be tried as adults to rein in a legal code he believes has tilted too far in favor of get-tough policies. (AP Photo/Rich Pedroncelli, File)

The Association of American Physicians and Surgeons, in the lawsuit filed late last week in the U.S. District Court for the Eastern District of California in Sacramento, asked the court to block the law.

“This bill basically empowers private insurance companies to set prices for physicians and other caregivers who are not even in their network,” said Andrew Schlafly, general counsel for the group. “It basically gives the insurance companies the power of government.”

The legislation, Assembly Bill 72, authored by Rob Bonta, D-Alameda, removes patients from what is essentially a dispute between insurers and health care providers who don’t contract with insurers.

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Some doctors — particularly hospital specialists such as anesthesiologists, radiologists and pathologists — don’t have contracts because they don’t think they will be adequately reimbursed. So even when patients go to an in-network hospital, they can get hit with out-of-network charges for these specialists.

The law will require insurers to reimburse these out-of-network providers at 125 percent of the rate Medicare pays, or at the insurer’s average contracted rate, whichever is greater.

The lawsuit, which names the governor and the head of the state Department of Managed Health Care as defendants, claims the law violates the U.S. and California constitutions in several ways, including denying doctors due process as well as just compensation for their labor.

The group also claims doctors will withdraw from providing services in greater numbers in predominantly minority communities, thus violating constitutional equal protection clauses.

Bonta said in a statement that the law “expressly provides due process for physicians by allowing them to seek any legal remedy they see fit if they are dissatisfied with their compensation” and will shield consumers from potentially devastating bills.

She said the law does not cede pricing authority to the insurers, nor is there evidence that minority communities will be disproportionately affected.

The bottom line, she said, is that income for certain specialists will be reduced under the law. She said lowering overall health care costs is important to “protect patients, both their health and financial well being.”